Considering that customers are at the tail end of the outbound supply chain, and companies across all industries are competing on customer experience, it’s not surprising that the outbound supply chain gets a bit more love and attention than the inbound side. But the fact is that supply chains end-to-end are an interconnected system, so what happens on the inbound side matters on the outbound side and ultimately impacts customers, as well. What are the key challenges companies face with inbound logistics? What actions should they take now to move up the maturity curve? How can technology help? Those are the main questions I discussed with Omar Nadi, Director, Supplier Product Management at Elemica, during a recent episode of Talking Logistics.
Given that most companies are more aware of, and put more emphasis on, the outbound side of the supply chain, I began our discussion by asking Omar what he sees as the main challenges companies face with the inbound supply chain.
Omar related, “The majority of companies I work with have a lack of control over and visibility to the inbound supply chain. Most companies use buying terms that have suppliers responsible for freight shipment, and when you relinquish control to that critical side of the supply chain, you lose visibility to what is happening. That becomes more critical when you have extended supply chains where visibility has an even larger impact. And that can lead to issues at the time of delivery such as trucks queued up because of a lack of delivery schedules or problems clearing customs at ports. This can impact goods feeding into production lines. There are a lot of unknowns and inefficiencies introduced through that lack of control.”
Lessons from COVID-19
COVID-19 has had such a dramatic impact on supply chains around the world, so I asked Omar how it has affected companies’ inbound operations and strategies. Omar comments that, “Some companies have already employed resiliency strategies to mitigate the effects somewhat, but these are very challenging times. Supply and demand planning are more difficult. It’s more important than ever to share information with your suppliers.”
Omar shared a number of strategies companies should consider, which I briefly summarize here:
- Sourcing strategies: Build closer relationships with strategic suppliers and better communicate with them to ensure capacity.
- Single-sourcing: Consider diversifying to multiple suppliers to mitigate risk
- Logistics strategies: Do you take more control of inbound freight or consider sourcing more domestically?
- Warehousing strategies: Do you employ a centralized warehouse strategy or use 3PLs who have flexible routing strategies?
- Production strategies: Are your production lines flexible enough to take advantage of available supplies and demand?
“The companies that are being successful are the ones that are flexible and agile,” Omar says. “The lesson here is that these things do happen and you have to be prepared and resilient, and you need to develop collaborative relationships with your suppliers.”
Symptoms and Response
I next asked Omar to share the symptoms companies should look for to identify problems with their inbound logistics. He notes that companies biggest fear is shutting down production, so this often results in excess inbound inventory due to their lack of visibility and confidence in inbound processes. He comments that companies that don’t know they have a problem with inbound shipments until the day they are supposed to arrive are clearly lacking inbound freight visibility. Omar also mentions excessive costs for expedited inbound freight as another sign of problems with inbound logistics processes, as well how long it takes to understand the impact of supply disruptions. Finally, Omar says a lack of insight into supplier performance and true landed cost is another symptom of poor inbound processes.
To respond to these challenges and move up the maturity curve, Omar states, “Digitization initiatives are the foundation of visibility and control. You have to take latency and manual processes out of the equation. You can’t make informed decisions if you don’t have the data. This digitization should extend to your suppliers and all third-party partners.
“Another aspect of moving up the maturity curve is collaborating with suppliers to understand the causes of disruptions so you can put plans in place to avoid or mitigate problems in the future. And then reevaluating your logistics strategies, taking into account, for example, whether you or your suppliers or 3PLs are in the best position to negotiate better rates and capacity with carriers.
“To summarize, step one is to get the data through digitization. Step two is putting processes around collaboration and understanding the issues, and step three is to optimize the processes and build a logistics strategy to fulfill your supply chain goals.”
How should companies measure their own performance on inbound logistics and where they stand on the maturity curve? Omar shared several great metrics companies can use to evaluate their performance based on their logistics strategies. Therefore, I recommend that you watch the full episode for all of his insights and advice. Then keep the conversation going by posting your own thoughts and recommendations.